Manulife Securities International Ltd. has received an exemption from the ban on mutual fund commission rebates under the national sales practices rule.
Regulators received an application from Manulife Securities on behalf of itself and its reps for an exemption from the sales practices rule’s prohibitions on certain rebates of redemption commission or fees.
The firm had sought a decision that the rule would not apply to rebates paid by reps to clients who are switching from third-party funds to Elliott & Page funds.
The Ontario Securities Commission granted the relief on several conditions:
- Manulife and the relevant rep must comply with the informed written consent provisions of the rule.
- Reps must advise each client in advance that any rebate proposed in connection with the purchase of its Elliott & Page funds will be available to the client regardless of whether the redemption proceeds are invested in an Elliott & Page fund or a third-party fund (to a maximum of the commission earned by the rep on the purchase); and the rebate will not be conditional on a purchase of securities of the Elliott & Page funds.
- Reps must not be subject to quotas (either express or implied) concerning the Elliott & Page funds, and must continue to be entitled to offer competing third-party funds to their clients.
- Manulife Securities must not provide an incentive (monetary or non-monetary) to any rep to recommend the Elliott & Page funds over third-party funds.
- The amount of the proprietary rebate that is borne by a rep must be determined by the rep and the client.
- Reps that pay the rebates must not be reimbursed directly or indirectly for this by Manulife Securities.
Manulife Securities told regulators that the decision to pay rebates will be made by the rep based on the best interests of the particular client. It said reps are not required to sell Elliott & Page funds to clients, have no quotas, and are not provided with incentives by Manulife or any of its affiliates.